Thursday, November 8, 2007

Cuomo Subpoenas Fannie and Freddie

New York Attorney General Andrew Cuomo's office issued subpoenas to government-sponsored mortgage finance giants Fannie Mae and Freddie Mac requiring the production of documents related to mortgages issued by Washington Mutual, a large thrift, that included allegedly inflated home appraisals.  The AG sued First American Corp. earlier for providing inflated appraisals in response to pressure from WaMu to increase the valuation of the property to support larger home mortgage loans.  A press release (here) states:

The Martin Act subpoenas sent by Cuomo seek information on the mortgage loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual, the nation’s largest savings and loan. The subpoenas also seek information on the due diligence practices of Fannie Mae and Freddie Mac, and their valuations of appraisals. Today’s announcement marks the latest expansion of Cuomo’s industry-wide investigation of mortgage fraud. Last week, Cuomo filed suit against First American Corporation (NYSE: FAF), and its subsidiary eAppraiseIt, one of the nation’s largest real estate appraisal management companies, for colluding with Washington Mutual to inflate the appraisal values of homes.

Fannie and Freddie also acceded to Cuomo's demand that they appoint an independent examiner to review all mortgages they purchased from WaMu to determine whether the loan files include faulty appraisals. (ph)

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